Economic cycles are a fact of life, and no business is immune to problems. As a business owner, when your own clients have financial problems, they may be unwilling or unable to pay you, and that causes you to have financial problems as well. If it happens too often, you could find your own business struggling.
Fortunately, you can learn to spot signs that your clients are experiencing financial difficulties. When this happens, you can take proactive steps to ensure that you continue to be paid for your work. Here are some signs that your clients may be having financial trouble.
They Stop Paying on Time
This is perhaps the most obvious signal of financial distress. A variation on this scenario is when a client who normally pays cash starts paying with a credit card instead. Of course, it’s possible that a client simply has forgotten to pay, and this should be the first thing you ask because it can be remedied immediately. However, you’re wise to keep an eye on clients who suddenly have trouble paying on time.
A Normally Easy Client Starts Finding Issues with Your Services
When a normally easy-to-please client suddenly starts finding problems with your services, they could be stalling for time or angling for a discount. When a client has problems, naturally you want to get to the bottom of it, so ask for details. If they start complaining about things they have never mentioned before, they could be trying to get out of paying.
Client Says They’ll Pay You After Switching Banks
A client who promises to pay after switching banks may be hiding the fact that they’ve overdrawn their account and are trying to prevent the money they have from going to overdraft fees. Likewise, if an individual client promises to pay after they start their new job, it may be a sign that they are currently unemployed.
You Hear About Problems from Other Clients
People talk. Sometimes, in the course of ordinary business, you or your employees may learn information from one client about another client that is struggling financially. This can be particularly true in smaller communities. While you don’t want to believe everything you hear, the talk about a business’ financial problems is certainly worth noting.
A Strong Competitor to Your Client Appears
If a new competitor for one of your clients arrives on the scene and appears to be making a favorable impression, keep an eye out for your client’s status. While there may well be plenty of room for another competitor, in some cases, such as a large chain competitor opening up down the street from your smaller independent client business, your client may find it hard to stay competitive.
High Employee Turnover at Your Client Business
Employees can be remarkably astute about their employer being in financial trouble. If you find out that your client company is experiencing higher-than-usual employee turnover, it should raise a red flag. Likewise, if you find out that your client is selling a significant amount of business equipment, it could indicate they are trying to raise cash to stay afloat.
If you notice signs that one of your clients is struggling, ask them how they are doing. A proactive approach benefits you both. If you work with your client before problems become serious, you may be able to develop a plan that prevents their account from becoming delinquent. This can also strengthen loyalty and help you gain new referrals.
Staying apprised of your clients’ business health helps with debt collection because you’re less likely to let smaller problems grow unmanageable. With a debt collection service like Rocket Receivables, you can be confident that you are maximizing your debt collection efforts with industry-leading compliance. If it’s time for you to manage your debt collection with maximum effectiveness and efficiency, we invite you to buy now.